Monday.com (MNDY) Q1 2026 Earnings Transcript

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Date

Monday, May 11, 2026 at 8:30 a.m. ET

Call participants

- Co-Chief Executive Officer & Co-Founder — Roy Mann

- Co-Chief Executive Officer & Co-Founder — Eran Zinman

- Chief Financial Officer — Eliran Glazer

- Chief Revenue Officer — Casey George

Full Conference Call Transcript

Roy Mann: Thank you, Byron, and thank you, everyone, for joining us today. Monday.com delivered a strong start to 2026. Q1 revenue grew 24% year-over-year reflecting sustained demand for our platform as enterprises consolidate their work infrastructure. We generated a record $49 million in operating profit, demonstrating that our growth is increasingly efficient. Adjusted free cash flow margin expanded to 29%, underscoring the financial durability of our business model. Gross retention continued to improve in Q1, reaching historical highs for the company, reflecting how deeply monday.com is embedded in how our customers run their businesses. Enterprise momentum continued to build with 42% of ARR coming from our customers with over $50,000 in ARR.

A record number of new customers with over $500,000 in ARR and average contract values continue to expand, reinforcing that the consolidation of work Instructure onto monday.com is a durable enterprise-led trend. The market is also responding to our AI product. Approximately 3% of our net new ARR in Q1 was driven by AI, a figure we expect to grow as our AI offering expand and mature. We are also seeing the benefits of AI play out in sanmina.com itself. Since 2025, AI has driven a 32% increase in our output per developer and a 38% reduction in product time to market. AI gives our engineers the bandwidth to be more rigorous about the architecture, edge cases and long-term maintainability.

The result is a team that ships more and breaks less. We believe this is an early but meaningful signal of what AI native engineering looks like in practice, and we intend to keep pushing on that frontier. Now let me turn it over to Eran to walk you through some of the significant progress we've made in our AI-driven products during the quarter.

Eran Zinman: Thank you, Roy. At our Investor Day last September, we laid out a fundamental shift in how we see monday.com. Not a platform that helps teams manage work, but one that actually does the work for them. Last week, we do the most significant step in that journey, changing our core offering from monday Work Management to monday AI work platform. This is not a feature release or a rebrand. We have rearchitectured the core of our platform around single belief that work should be orchestrated between humans and AI agents at scale from a single system of records.

AI agents that execute work flexible software that adopts to how teams operate and enterprise-grade governance all grounded in monday DV are single source of truth that give AI the context to drive real outcomes. This quarter, we took that foundation further with Money DB 3.0, delivering 100x increase in scale from 100,000 items for our board to over $10 million with high performance low latency execution designed to accelerate AI adoption rather than constrain it. A stand-alone AI tool that can automate a task, monday can run an entire operation. And with more than 250,000 customers already running their work in said monday, we have a data advantage that no point solution can replicate.

Alongside the platform launch, we're making an equally important change to how customers pay for monday. We recently introduced a new seats credit pricing structure for new customers, moving to consumption-based pricing that aligns what customers pay with the value AI actually delivers. As AI agent takes on more work across organizations, revenue expands naturally without requiring additional seats purchases. We plan to allow existing customers to opt in to this new model with enterprise customers receiving complementary AI packages to support adoption at scale. In addition to that, we are excited to announce our agreement to acquire One AI.

Their team spending years, solving one of the hardest problems in enterprise AI, making voice agents that actually work in production environments. With this acquisition, we are bringing native voice capabilities directly into the AI work platform, extending the way agents can engage with customers and teams. We're not managing monday.com as a company defending its position. We are rebuilding it as the company that defines what an AI work platform means for businesses. Q1 was a strong step in that direction. We remain focused on execution, and we look forward to demonstrating continued progress throughout 2026. With that, I'll turn it over to Eliran to cover our financial and guidance.

Eliran Glazer: Thank you, Eran, and thank you to everyone for joining our call. Today, I'll review our first quarter fiscal year 2026 results in detail and provide updated fiscal year 2026 guidance. As Roy mentioned, we have had a strong start to 2026. Total revenue in Q1 came in at $351 million, up 24% from the year ago quarter. Our overall NDR was 110% in Q1. we now expect overall NDR to slightly decline by the end of fiscal year 2026. As a reminder, our NDR is a trailing 4 quarter weighted average calculation. For the reminder of the financial metrics disclosed unless otherwise noted, I will be referencing non-GAAP financial measures.

We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release. First quarter gross margin was 89% compared to 90% in the year ago quarter. Research and development expense was $78.4 million in Q1 or 22% of revenue, up from 19% in the year ago quarter. Sales and marketing expense was $158.2 million in Q1 or 45% in revenue compared to 48% in the year ago quarter. General and administrative expense was $28.6 million in Q1 or 8% of revenue compared to 9% in the year ago quarter. Operating income was $49 million in Q1, up from $40.8 million from the year ago quarter, and operating margin was 14%, similar to the year ago quarter.

Operating margin in Q1 had an approximately 190 basis points negative FX impact, mainly from the appreciation of the Israeli shekel compared to the U.S. dollar. Net income was $56 million in Q1 compared to $58.4 million from the year ago quarter. Diluted net income per share was $1.15 in Q1 based on 48.9 million fully diluted shares outstanding. Total employee head count was 3,211 an increase of 56 employees since Q4 '25. For the remainder of fiscal year 2026, we expect head count to stay largely flat, reflecting the productivity gains AI is already delivering across our organization. Moving on to the balance sheet and cash flow.

We ended the quarter with $1.21 billion in cash, cash equivalents and marketable securities compared to $1.67 billion at the end of Q4 2025, reflecting $553 million of shares repurchase executed during the quarter. As of the end of Q1, approximately $182 million remained available under our existing share repurchase authorization program. Adjusted free cash flow for Q1 was $102.8 million, and adjusted free cash flow margin was 29%. We now estimate that the accelerated share buyback executed during Q1 will reduce full year 2026 adjusted free cash flow by approximately $20 million.

Adjusted free cash flow is defined as net cash from operating activities, less cash used for property and equipment and capitalized software costs, plus costs associated with the build-out and expansion of our corporate headquarters. Let's now turn to our updated outlook for fiscal year 2026. For the second quarter of fiscal year 2026, we expect our revenue to be in the range of $354 million to $356 million, representing a growth rate of 18% to 19% year-over-year. We expect non-GAAP operating income of $46 million to $48 million with an operating margin of 13% to 14%, which assumes a negative FX impact of 100 to 200 basis points.

For the full year 2026, we expect revenue to be in the range of $1.466 billion to $1.475 billion, representing growth of 19% to 20% year-over-year. We expect full year non-GAAP operating income of $185 million to $191 million, with an operating margin of approximately 13%, which assumes a negative FX impact of 100 to 200 basis points. We expect full year adjusted free cash flow of $280 million to $290 million with adjusted free cash flow margin of 19% to 20%, which assumes a negative FX impact of 100 to 200 basis points. Let me now turn it over to the operator for your questions.

Operator: [Operator Instructions] And our first question comes from the line of Raimo Lenschow with Barclays.

Damon Kogan: This is Damon Kogan of for Raimo. Can you help us understand the new updated NDR guide. As I think about the Q1 results and the full year guide, it seems like stabilization throughout the business and then I look at the NGR guide and print across your cohorts. It just seems like there's more stability in results than maybe the guide. Any help there would be great.

Eliran Glazer: Ryan, this is Eliran. Thank you for the question. So there is a lot of retention and expansion side that we are very positive on. Gross retention is at historical highs. We're still seeing double-digit fee growth year-over-year in our mid-market and enterprise customers, 34% of our 50,000 customers court has adopted more than one product. It was 29% in Q4. So we're seeing a lot of positive signs. As a reminder, we are lapping the pricing actions from 2024 2 years ago in 2025. And they increased our NDR by 12%. We're going to lap this at the end of Q2 or during -- sorry, at the end of Q2.

And we don't believe that expansion or new adoption will now be enough to offset some of the pricing growth over that we have seen in the past.

Damon Kogan: Got it. And I guess, can you just provide an update on the top of funnel demand that you're seeing now compared to the end of 2025. I know the initial 2026 guide did imply some degradation to telefunnel. So I guess just what is the updated full year guide now implied maybe compared to Q1.

Eran Zinman: Yes, this is Eran. So look, we have nothing new to report with Pay Search. Overall, the top of funnel environment remains soft, but it's pretty much in line with our expectations that we gave in the beginning of the year. I would say that on top of that, ACV of new lands is increasing across touch and no touch. So we've seen high-quality leads coming into the platform. And we continue to manage performance marketing cautiously. So pretty much in line with what we expected.

Operator: Next question comes from the line of Josh Baer with Morgan Stanley.

Josh Baer: Congrats on a good quarter. I wanted to talk a little bit more about the new sets credits pricing model. Maybe to start, like can you just provide a little more context on how exactly that works? And then also wondering what are the impacts in 2026 from the new model?

Eran Zinman: Yes. Josh, this is EranSo maybe I can start and then hand it over to Casey. So look, we're very excited for this change. It's the biggest change in the company history we're changing the core offering of our products with the new native agents within the platform, customers be able to do the actual work in addition to managing work. Part of that change is that new customers will have 2 vectors of expansion. One with seats, meaning the more people they add, the more they pay for seats that the same way it used to be. But there's an additional factor on top of that for AI credit.

So the more they consume a credit the more they pay, the more they're going to use our agents and other functionality. For existing products, it's going to be gradual. I'll let Casey kind of cover the change we're going to do with existing ones.

Casey George: Yes. So we spend a lot of time -- oh, hi, Josh, by the way, we spend a lot of time of getting feedback from our customers. And what we've rolled out is very consistent with how they want to consume value in our platform. As you heard from along with our new customers, it is -- it comes with seeds plus credits. Our existing customers, it's going to be an opt-in motion. So we'll work with them over the next a couple of years as they look to move into this model.

We are going to incentivize those customers to move to the new model, especially with our touch customers, where we spend a lot of time with them building use cases and finding new ways for them to consume our platform leveraging AI.

Josh Baer: Got it. And so for -- as far as 2026, are there any assumptions on the impacts from the new model, either from the new customers who are on it? Or I guess also, what are the assumptions as far as the adoption from existing customers? And then just last on this subject...

Eliran Glazer: It's Eliran. So Josh, it's still early stage. -- we will have a much clearer picture in the coming months, and then we can provide update or more color on what we are going to see. For now, we didn't assume any significant impact or any impact on the numbers.

Operator: Ader with KeyBank Capital Markets.

Unknown Analyst: I guess if I can just quickly follow up on that pricing model as well. Are you guys actually seeing either slowing in employee head count or seat growth at existing customers? Or are you just kind of making this change in anticipation just to decouple yourselves from being so dependent on seats. I'm curious whether it's forward-looking or you're actually seeing it today?

Casey George: Yes. Thank you for the question. We have not seen any degradation in demand relative to seats. We have seen those customers looking to use our platform leveraging AI. And that's why we've launched this new platform. So overall, the demand continues to be strong for new seats, and we actually see acceleration in some of the emerging markets where we've invested. So upmarket is strong. Seat demand continues to be very solid, and they're taking on new workloads, leveraging AI.

Unknown Analyst: Great. Okay. Actually, if we -- I'll stick with you. The larger lands from the direct sales motion with larger trying to land a little bit more upmarket. Curious how that's trended? I know the 50,000, 500,000 seats, but curious whether that's driven by new lands or are people kind of graduating up into that segment of the customer base.

Casey George: Yes. And it's both. We saw double-digit growth for both mid-market and enterprise segments relative to seats. -- our ACV grew 22% year-to-year. Gross retention at historical highs. And obviously, with RPO, we see some seasonal decline in which we're anticipating. It's pretty much in line with what we've seen in prior Q1 performance. Pipeline is very strong. As a matter of fact, our March was 1 of the strongest months we've ever had. So as we move upmarket, as we've talked about before, we get exposed to the buying cycles of those larger customers. So we see less lineari